According to a recent research report by Wall Street bank Citi, the relationship between stocks and cryptocurrency markets is likely to weaken in the long term as the crypto asset class matures and adoption grows.
While equities have been the most significant macro driver of crypto markets, Citi analysts, led by Alex Saunders, believe that the correlation will fall over time. They cite factors such as the growth of the crypto investor base, advancements in technology, and increased adoption as key drivers for this decoupling.
The speculative nature of cryptocurrency markets may still lead to inflated risk asset correlations, particularly during risk-off events. However, Citi expects that a more transparent regulatory regime in the U.S. will contribute to more idiosyncratic price action in the crypto space.
Furthermore, the bank anticipates that Bitcoin volatility will continue to decrease in the long term as institutional adoption rises. This trend could potentially stabilize the crypto market and reduce its sensitivity to equity market fluctuations.
Citi also noted that crypto was the only asset class that saw its market cap grow as a percentage of U.S. equities last year. This observation highlights the increasing prominence and potential decoupling of cryptocurrencies from traditional financial markets.
The report suggests monitoring Bitcoin’s correlation to gold, as it may serve as an early indicator of its “store of value” use case. As Bitcoin gains more mainstream acceptance and demonstrates its value preservation properties, its relationship with gold could provide insights into its long-term market positioning.
Tags: Citi, equities, crypto correlation, Bitcoin volatility, institutional adoption, store of value
Source: https://www.coindesk.com/markets/2025/02/05/equities-crypto-relationship-is-likely-to-weaken-in-the-long-term-citi-says